Build-A-Bear Workshop narrows its loss in Q2, plans new stores
While Build-A-Bear Workshop continues to navigate amid declining store traffic, the company continues to open new stores.
The specialty retailer will return to Manhattan this fall, opening a location next to the Empire State Building. The new store, which is near where Build-A-Bear previously operated a temporary location, is expected to draw from both the local shoppers and tourists that frequent the area.
However, it is the chain’s smaller format concourse locations that are paying off in a challenging retail environment. Called concourse shops, these smaller stores require less capital, shorter term leases and, at approximately 200 sq. ft., they are driving “higher sales per square foot than at traditional mall stores,” Build-A-Bear CEO Sharon Price John said in an earnings call with analysts Thursday.
Despite these gains, the company had a net loss of $1.5 million, or $0.10 per share for the second quarter ended July 1. This was compared to a net loss of $4.3 million, or $0.28 per share, in the fiscal 2016 second quarter. The adjusted net loss was $2.3 million, or $0.15 per share, compared to an adjusted net loss of $3.7 million, or $0.24 per share, in the fiscal 2016 second quarter.
Total revenues were $77.2 million, an increase of 2.8%, compared to $75.1 million in the fiscal 2016 second quarter. Consolidated comparable sales declined 0.9%. This included a 1.5% decrease in North America, and a 2.2% increase in Europe. Consolidated comparable e-commerce sales increased 13.3%, following an 11.7% increase in the fiscal 2016 second quarter.
During the second quarter, the company opened 23 new stores, closed six locations and remodeled or reformatted 16 stores. The company also added 17 concourse locations in the second quarter. As of July 1, the company operated 353 company-owned stores — including 93 Discovery format stores — with 293 locations in North America, 59 in Europe and 1 in China. The company’s international franchisees ended the period with 88 stores in 11 countries.
“We are pleased to report top line growth as well as expansion in merchandise margin and gross profit margin enabling us to narrow the pre-tax loss in this year’s second quarter,” Price John said.
“While we had a marginal decline in consolidated comparable sales, primarily due to continuing retail traffic challenges, this was more than offset through the successful implementation of our diversification strategies, including the positive impact of the opening of more productive Discovery format stores and a new, innovative concourse shop model, as well as revenue from alternative sources, including experiential wholesale, international franchising and outbound licensing,” she added. “We expect the continued disciplined execution of our stated strategies to move us toward our long term goal of sustainable profitable growth.”
Mall owners take pay cuts
Macerich CEO Arthur Coppola had the potential for total compensation worth about $12 million in 2016, but his company’s recent proxy filing showed him receiving less than half of that.
Coppola is just one of many senior executives of publicly traded mall-owning companies to feel the sting brick-and-mortar’s right-sizing in his pocketbook, according to a report in the Wall Street Journal.
Simon Properties CEO David Simon received stock valued at $9.5 million from 2013 to 2015, but received no distribution last year due to the elimination of the company’s stock-grant program. Poor performance of GGP stock left chief executive Sandeep Mathrani’s paycheck a million bucks lighter.
The REIT is the reason. The real estate investment trust industry is ahead of most other industrial sectors in aligning executive pay plans to the interests of shareholders, according to Jeremy Banoff, senior managing director at compensation consultant FPL Associates.
“The rest of the world is playing catch-up,” Banoff told the Journal.
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Carter’s sales soar in Q2
Carter’s credits its U.S. retail and international segments, and its new acquisition for a jump in its second quarter sales.
Net income for the quarter ended July 1, increased $1.7 million, or 4.8%, to $37.9 million, compared to $36.2 million, in the second quarter of fiscal 2016. Earnings per diluted share was or $0.78, which beat analyst expectations of $0.71 per share, according to Zacks Investment Research.
The company’s net sales increased $52.6 million, or 8.2%, to $692.1 million. This was driven by growth in Carter’s U.S. retail segment, and the benefit of Skip Hop, a global lifestyle brand for families with young children. Carter’s acquired the company in February 2017. Specifically, Ship Hop contributed $25.0 million to consolidated net sales in the second quarter of fiscal 2017.
Changes in foreign currency exchange rates in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016 adversely affected consolidated net sales in the second quarter of fiscal 2017 by $2.6 million, or 0.4%. On a constant currency basis (a non-GAAP measure), consolidated net sales increased 8.6% in the second quarter of fiscal 2017.
For the U.S. retail segment specifically, sales increased $39.0 million, or 11.1%, to $391.8 million. U.S. retail comparable sales increased 6.0%, comprised of comparable stores sales growth of 0.4% and comparable e-commerce sales growth of 27.6%. Ski Hop contributed $0.9 million to segment net sales in the second quarter of fiscal 2017.
In the second quarter of fiscal 2017, the division opened 11 stores and closed three stores.
“We achieved good growth in sales and earnings in our second quarter,” said Michael Casey, chairman and CEO.
“Our growth was driven by our retail and international businesses, and the contribution from our Skip Hop brand which was acquired earlier this year,” he added. “Given the strength of our fall and holiday product offerings, we’re forecasting good growth in the second half and expect to achieve our growth objectives this year.”
For the remainder of fiscal 2017, the company projects net sales to increase approximately 4% to 6% compared to fiscal 2016, and adjusted earnings per diluted share to increase approximately 8% to 10%. This is compared to $5.14 in fiscal 2016. This forecast for fiscal 2017 adjusted earnings per diluted share excludes anticipated expenses of approximately $2.5 million related to acquisitions, and approximately $0.3 million related to the company's direct sourcing initiative, which includes severance and relocation costs.